Individuals may be familiar with open enrollment periods every fall when they’re able to make changes to their 401(k) investment plans for the next year. But employers also have some important year-end best practices to keep in mind for their sponsored 401(k) retirement plans.
As a plan sponsor, you want to deliver the best possible opportunities for your plan participants. And you want them to be worry-free and confident about their future when it comes to their retirement plans. That’s why you should keep these four end-of-year 401(k) plan considerations in mind:
1. Update Plan Documents
As the year goes by, plans may require updates to comply with changing company structures and goals. Take some time to ensure your plan document is updated to comply with any required ERISA plan amendments or any plan adjustments as a result of changes within the company. This is especially important following a year with large-scale events like the COVID-19 pandemic or passage of the SECURE Act which may have had drastic impacts on your business. Analyzing the plan design and making adjustments as needed can be a very valuable benefit for business owners.
2. Provide Year-End Education and Guidance to Employees
Navigating retirement plans can be overwhelming for employees, which is why helping them understand year-end opportunities and planning accordingly for the next upcoming year can be a great benefit to your staff. For example, many employees may want to ensure they maximized their annual contributions for the year and their investments are properly allocated to align with their goals. Providing comprehensive planning education can be a valuable resource to help participants reach their saving goals, which could also result in positive ripple effects like trust and loyalty to your company.
3. Discuss Plan Design Changes
While auto-enrollment and auto-increase can typically be added at any time during a plan year, many companies like to start the year off with adding these features to the plan. Additionally, as a result of COVID-19, many employers may be considering to suspend their employer contribution for the year. If either of these is a goal for you into the new year, work with your advisor or retirement plan consultant to discuss the advantages and disadvantages that adding these components may have on the plan. Proper and timely plan document amendments and employee communication are also required.
4. Review Committee Meeting Structure and Process
Year-end is a good time to review and make any necessary changes to the plan’s investment fiduciary committee structure and process. As plan committees head into the new year, it’s possible that changes to committee members (such as additions or deletions) may be needed or changes to the roles committee members hold should be made. Also, committee charters should be reviewed to ensure they still follow the committee’s process.
As an employer, the considerations above are a starting point for year-end planning for your company’s 401(k) retirement plan. As you begin reviewing your plan documents and proactively communicating with plan participants, now might be a good time to connect with your retirement plan consultant or advisor to discuss specific changes you can make to your plan or how to provide a higher value to your employees.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
AIF®, QKA Brian leads a highly qualified team and oversees the retirement plan governance and fiduciary responsibilities for his clients, along with their administration, operations and design. He has more than 20 years of broad experience working in retirement solutions, including managing plans for large, multi-hundred-million-dollar corporations as well as small businesses. Brian supports his clients by designing customized retirement plans that are focused on specific goals and needs....Read More